Markets cheer EU debt gamble as Europe avoids legal chaos but entrenches long-term financial exposure to conflict.
European markets responded positively on Friday after the European Union agreed to fund Ukraine through large-scale joint borrowing rather than seizing frozen Russian assets—a decision analysts say strengthens financial stability while quietly redefining Europe’s fiscal future.
EU leaders approved a plan to borrow €90 billion to lend to Ukraine over the next two years to support its defense against Russia. Hungary, Slovakia, and the Czech Republic opted out, but the broader agreement marked a decisive shift away from a legally risky proposal to confiscate Russian state assets held at Belgium’s Euroclear.
That abandoned proposal had deeply unsettled financial institutions. Christine Lagarde, President of the European Central Bank, warned that such a move could undermine confidence in the euro by making foreign governments question whether their reserves were truly safe in Europe.
Instead, Russian assets will remain frozen until Moscow pays reparations—described by one senior banker as treating them “like the family silver: untouched, but not forgotten.” The euro remained broadly stable following the decision.
Beyond Ukraine, analysts say the real significance lies elsewhere: joint EU borrowing is no longer taboo. What began as an emergency COVID-era experiment is fast becoming a standard policy tool. With more than €700 billion in joint debt already outstanding and an additional €150 billion earmarked for defense lending, Europe is normalizing collective debt issuance.
Supporters argue this reassures investors that the EU can act decisively during future crises. Critics caution that bond markets are already stretched, especially as Germany ramps up spending, raising concerns about long-term debt sustainability.
Still, by rejecting asset seizures and embracing borrowing, Europe chose legal certainty over confrontation—at the cost of deeper financial entanglement in a prolonged war.
